On July 31, 2024, Johnson Controls International PLC (JCI, Financial) released its 8-K filing for the fiscal third quarter of 2024. Johnson Controls, a global leader in smart, healthy, and sustainable buildings, manufactures, installs, and services HVAC systems, building management systems and controls, industrial refrigeration units, and fire and security solutions. In fiscal 2023, the company generated nearly $27 billion in revenue.
Performance Highlights
Johnson Controls reported GAAP earnings per share (EPS) of $1.45 for Q3 2024, while adjusted EPS, excluding special items, was $1.14, aligning with analyst estimates. The company's revenue for the quarter was $7.2 billion, a 1% increase from the previous year, but fell short of the estimated $7.52 billion. GAAP net income stood at $975 million, with adjusted net income at $769 million.
“Our third quarter results exceeded expectations with robust margin expansion, strong free cash flow generation, and continued Service demand,” said George Oliver, Chairman and CEO.
Segment Performance
| Segment | Q3 2024 Sales (in millions) | Q3 2023 Sales (in millions) | Change |
|---|---|---|---|
| Building Solutions North America | $2,899 | $2,665 | 9% |
| Building Solutions EMEA/LA | $1,081 | $1,045 | 3% |
| Building Solutions Asia Pacific | $575 | $736 | -22% |
| Global Products | $2,700 | $2,700 | 0% |
Financial Achievements and Challenges
Johnson Controls achieved significant margin expansion across several segments. The Building Solutions North America segment saw a 9% increase in sales, with a segment EBITA margin of 18.0%, up 360 basis points from the previous year. The Building Solutions EMEA/LA segment also performed well, with a 3% increase in sales and a segment EBITA margin of 10.3%, up 170 basis points. However, the Building Solutions Asia Pacific segment faced challenges, with a 22% decline in sales, primarily due to continued weakness in the Systems business in China.
Key Financial Metrics
Johnson Controls reported cash provided by operating activities of $1.0 billion, free cash flow of $922 million, and adjusted free cash flow of $1.3 billion. The company paid dividends of approximately $249 million and repurchased 6.0 million shares of common stock for approximately $402 million. Additionally, the company recorded pre-tax restructuring and impairment costs of $106 million and a pre-tax gain of $351 million related to insurance recoveries associated with the Aqueous Film Forming Foam (AFFF) settlement.
Analysis and Outlook
Johnson Controls' Q3 performance highlights its ability to generate strong free cash flow and expand margins despite revenue challenges. The company's backlog increased to record levels, driven by robust demand for its services. However, the decline in the Asia Pacific segment underscores the ongoing challenges in the Chinese market. The company's strategic divestitures and focus on becoming a pure-play provider of comprehensive solutions for commercial buildings are expected to unlock further value for shareholders.
For the fiscal fourth quarter of 2024, Johnson Controls expects organic sales to grow by approximately 7% year-over-year, with an adjusted segment EBITA margin of around 19.0% and adjusted EPS before special items ranging from $1.23 to $1.26. The company has tightened its full-year adjusted EPS guidance to $3.66 to $3.69, reflecting its progress and confidence in continued growth and value creation.
Explore the complete 8-K earnings release (here) from Johnson Controls International PLC for further details.
